PBM fight still on

Even though Express Scripts got the FTC go-ahead for its $29 billion acquisition of Medco, retail pharmacists are determined to stop the merger via federal courts.

After its exhaustive investigation, the FTC concluded that the commission "revealed a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders. The acquisition of Medco by Express Scripts will likely not change these dynamics: the merging parties are not particularly close competitors, the market today is not conducive to coordinated interaction, and there is little risk of the merged company exercising monopsony power."

Though they may have lost this round, the National Association of Chain Drug Stores and the National Community Pharmacists Association are taking the fight to federal court. The organizations, along with nine local community pharmacy companies, filed a suit last Thursday with the U.S. District Court for the Western District of Pennsylvania to immediately block the merger. The Preserve Community Pharmacy Access NOW! (PCPAN) coalition, the American Antitrust Institute, the American Consumer Institute and public interest attorney and former Federal Trade Commission policy director David Balto is also calling on state attorneys general to step in.

Meanwhile, Express Scripts defended their decision, saying they are addressing a national mandate to lower health care costs. It's "exactly what the country needs now," says George Paz, chairman and CEO.

As pharmacists make their case, we've hardly seen employers weigh in directly on the consequences, but the coaltion, which includes several businesses, indicates that a consolidated PBM of this size would have the "unfettered ability to increase prices and reduce access to pharmacy services. This would result in higher costs for prescription medications that would need to be absorbed by employer health care plans and patients. It would also result in decreased access to local community pharmacies that provide convenient and helpful services and the elimination of good pharmacy jobs throughout the country."

According to the New York Times, while Express Scripts and Medco say they face aggressive competition from other managers for their business, a recent analysis by Morgan Stanley Research indicates that the 50 largest companies in the United States rely heavily on the services of Medco, Express Scripts and the third major benefit manager, CVS Caremark.

With their bargaining power stunted, employers also will have limited scope in one of health care's costliest areas: specialty drugs. "Benefit managers are able to profit from the difference between what employers and insurers pay for these expensive drugs and the cost," according to the NYT. "The combined company would control almost a third of the market, according to one analysis. Robert Seidman, a former pharmacy executive at WellPoint who is now a health care consultant in Los Angeles, said the merger could result in a conflict of interest in the way that the pharmacy benefit manager makes money. 'We’re not talking pennies here,' he said. 'We’re talking thousands' per drug."

The parent company of United Airlines and Continental Airlines said Wednesday that Continental has reached a labor agreement with representatives of some 7,200 non-union employees who work as reservation agents and in other passenger-service roles.